Hi Jay - yes, the piece by Alan Greenspan gets quite a bit of play as you might imagine. It was, however, written in 1967, not 1996, back when Greenspan frequented Ayn Rand's salon.
What I like most about it is that Greenspan explains how the gold standard, inevitably, causes boom and bust cycles - which don't necessarily coincide with Shumpeterian cycles of creative destruction. Thus, the rub is that bust cycles sink all boats, much as boom cycles raise them. I've seen too many people confuse booms with brains to think it's a good thing.
Greenspan doesn't get into the fact that the gold standard is almost inevitably deflationary, due to the fact that the gold supply almost never increases as fast as the economy increases. Nor does he discuss the fact that if the gold supply increases faster than the economy, that's inflationary. Gold isn't any more magic than fiat money in that respect.
Nor does he discuss the fact that central banks on the gold standard were no more willing nor able to allow a free market in gold than they are willing and able to allow a free market in money today. During World War I, all the combatant nations went off the gold standard, and printed fiat money, increasing the money supply on average 3 to 5 times - not counting Germany, which is a special case due to the hyperinflation. The same nations were back on the gold standard by 1925, and that's when the world started to slide into depression. It was seen in commodities first. By pegging the pound/gold ratio at the pre-war level, and the dollar/gold ratio at the pre-war level, England and the US forced their own economies into the worst deflation the world has ever known. The result is what we call the Great Depression. Nobel Prize economist Robert Mundell explains it quite well.
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And this is all without getting into the problem of foreign exchange rates. Whenever a country uses fixed exchange rates, it is a potential target for arbitrage plays - under the gold standard or not. A country with enough gold and an inclination to cause mischief to another country can do so - as France did to Germany and Austria at least twice in the 1920's.
Those who would have us return to the gold standard don't deny that gold causes boom and bust cycles - they say boom and bust cycles are good things and/or inevitable. Nor do they deny that the gold standard is deflationary - they say that deflation is a good thing.
This is a very old debate - Adam Smith suggested, in The Wealth of Nations (1776), that because gold was scarce, money could safely be backed by merchant's bills of exchange, without causing inflation.
Whether or not a nation, or the world, adheres to the gold standard, something very much resembling money will always be created using credit - and that's out of the hands of the central bankers and beyond their control.
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